Skip Navigation
Close close

This website uses cookies to ensure you get the best experience on our websites.

LEARN MORE chevron_right

How Self-Direction is Changing Real Estate Syndication: The Syndication Shift

Learn why real estate investors are turning toward syndications to passively invest their self-directed IRAs.

Posted on January 31, 2023 by Sarah Shellam

syndication shift

It’s no secret that real estate is a hot market, but there’s been a shift in the way people invest into that market. There is no doubt a change has occurred. It has always been common practice for the average property investor to invest their money into single-family homes by doing deals like fix-and-flips, rentals, or contracts such as options or wholesales. These deals often required the investor to provide a lot of hard or physical labor just to get the return on their investment. Now, investors are able to get the same returns without the hard and physical labor often associated with tenants and contractors.

So, why the change? What we are seeing is that more and more people seeking out passive property investments. People are discovering the power of real estate syndications and the ability to invest their Self-Directed IRA money passively.

What are Real Estate Syndications?

A syndication is a strategy commonly used by real estate investors that allows multiple people to pool their resources and invest in large real estate projects. This process of pooling resources with other investors to invest in a large property or real estate project can often been seen with investments such as an apartment complex (commonly referred to as multifamily for investors) or a commercial retail development. Syndications can also be used for raising capital for a multitude of other investment projects such as storage, mobile home parks, oil and gas, and more.

Real estate syndication is not just the process of pooling financial resources, though. Syndication also extends to pooling intellectual resources to make educated decisions about the properties you and your partners invest in. In a syndicated relationship, one party may invest the money, while another invests labor and time to find the property and run the day to day operations.

There are different roles that investors hold when getting involved in syndications. Some of the key roles that come together to make a real estate syndication happen are:

  • General partners
  • Sponsors
  • Key principals
  • Passive investors
  • The lender and the broker

The party investing the labor in the property is called the sponsor. Typically, the general partners include both the deal sponsor and the operator – but it’s important to note that sometimes these can be the same person.  Sponsors usually still invest some money, but the amount is much smaller than what the passive investors put in. Often, you’ll see syndicated partnerships structured as an LLC.

Pros and Cons of Syndications

There are numerous benefits that syndications offer, one of the biggest ones is accessibility. While single-family property may be more difficult to locate, there are still a ton of syndications – many that are happy to pull funds from self-directed IRAs. Real estate syndications are a great way to be passive and if you want to be more hands-off; self-directed multifamily investors don’t have to deal with management or the hustle and bustle of the local market. With real estate syndications, after the initial funding, self-directed accounts grow over time. When the investment has reached the point when it’s time to exit, the deal sponsors will liquidate that investment, and you see a lump sum of dividends return to your self-directed account.

Another syndication benefit is the possibility of generating a big profit, larger than the average single-family investment. Most syndications give their investors double-digit returns. The last benefit of real estate syndications is the ability to quickly get projects off the ground. If you have a property that you are interested in, syndication is one of the best ways to get the investment going fast.

How much is needed to get into a real estate syndication? The answer varies. There is no set number for syndications because every one is different, but on average, one can expect to contribute around $50,000 to $100,000. For some, this could be seen as a downside because not everyone has this amount to put toward a real estate syndication, but this is not unreasonable, and is still easier than producing the total amount of capital needed for this level of investment. If you’re looking to invest in large real estate projects but don’t have the funds to get a project started on your own, real estate syndications can be a great way to get your foot in the door.

Arguably one of the biggest downsides, though, is that you cannot leverage your credit to get into one of these types of investments. For example, with a fix-and-flip loan, the lender can provide funding to help out with the project, meaning you can begin doing deals with as little as $10,000 to $30,000. 

Self-Directed IRAs for Syndications

This is where Self-Directed IRAs come into play. While some may have larger amounts of personal cash available for investments, other Americans simply don’t have extra personal money in the amounts needed to get involved in real estate syndications. So, where do you have that type of capital? The answer is: your retirement accounts, like a self-directed IRA. On average, people have more money in old 401ks or IRAs than they do inside of their own personal checking accounts. Custodians like Quest Trust Company allow individuals to use those funds and invest in all the same deals that one would already be considering.

Syndications have become much easier to participate in in recent years, as investors and sponsors can easily connect online and at marketing events that happen all over the country. Being able to use self-directed IRAs to pool money together has made doing real estate syndications much more accessible for the average person, because you can contribute relatively small amounts of investment or retirement money to a real estate project that is interesting to you and reap the benefits accordingly.

Adding self-directed IRAs to your investing strategies will not only allow you to create money for the future, but will help you today, too. If you are interested in doing real estate syndications, Quest representatives would love to speak with you. You can talk to the expert team at Quest Trust Company, or view any of the numerous other resources Quest offers, like videos, blogs, and educational events. We’re here to help educate and provide flexible investment account options designed to meet the needs of modern investors, so give us a call today to start your passive investing journey with real estate syndications.    

Get our e-newsletter for all the exciting updates, events notices and valuable education

Chose Subscription Options
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
Back to Top
Close Overlay close
Team Placeholder

Title Goes Here

Firstname Longlastname


Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed dotempor incididunt ut labore et dolore. Lorem ipsum.

Close Overlay close

Login to your account

Client Login

Log into your Client Portal to access all your SDIRA investments and account information. Upload new investments, manage old ones, and prepare for any upcoming deadlines online HERE.

Client Login

Solo 401K Account

Managing your Solo 401k is quick and simple. Click here to access your online dashboard to manage your 401k account and submit your investments.

Solo 401K Account
Back to Top